Investment products may be held as trading stock by a taxpayer carrying on a business of share trading or options trading. However, whether a particular parcel should be treated as trading stock must be determined on a case-by-case basis.
Generally, the tax issues facing share traders versus passive investors are summarised below.
Search:Event/itemShare traderPassive investorsGain on disposalSale on trading accountCapital gainLoss on disposalSale on trading accountCapital lossDividends receivedAssessable income
When received but may be accounted for when derived (ie when dividend is declared)Assessable income
When receivedShare acquisitionPurchases on trading account
Allowable deductionCapital cost
No immediate deduction allowedBroker feesPurchases
Allowable deductionCapital cost
No immediate deductionGST on broker feesFinancial supply
Reduced input tax creditsCapital cost
No immediate deduction
No reduced input tax credits as no enterpriseShare investment course pre-ownershipIf business commenced then allowable deduction, however nexus must be establishedCapital cost
No immediate deductionShare investment course post-ownershipProfessional development
Allowable deductionInvestment expenses
Allowable deductionTechnical booksProfessional development
Allowable deductionInvestment expenses
Allowable deductionShare trading softwareBusiness expense
Allowable deduction (if not an establishment cost)Investment expenses
Allowable deductionInterest on margin loanInterest expense
Allowable deduction incurred to obtain assessable incomeInvestment expenses
Allowable deductionPrepaid interestDeduction up to 12 months if s82KZM satisfiedDeduction up to 12 months if s82KZM satisfiedBank charges on margin loanBank fees
Allowable deductionInvestment expenses
Allowable deductionCosts to establish loanBorrowing costs
Allowable deduction available over five yearsInvestment expenses
Allowable deduction available over five years
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